On May 8, 2015, the Supreme Court of Texas held in Phillips v. Carlton Energy Group, LLC[1]/ that an expert witness’s pre-suit evaluations of a coal bed methane concession in Bulgaria and his and another expert’s opinion testimony at trial were too speculative to support a jury’s damage finding for tortious interference related to the concession, but that several bona fide offers to purchase an interest in the concession, even if based on the same pre-suit expert evaluations, were “reasonably certain” valuation evidence potentially sufficient to support a damage award.
The decision is noteworthy for two reasons. First, it extended the existing requirement that lost profits be proved with “reasonable certainty” to proof of lost value when valuation is based on an extrapolation of estimated profits. (“We can think of no reason … why it would make sense to deny damages based on speculative evidence of lost profits but allow recovery of lost value based on the same evidence.”) Second, by its holding that bona fide offers in a recognized market to buy or sell an asset can be reasonably certain evidence of value, even if the offers are based on unverifiable assumptions and speculative extrapolations, the supreme court clarified in Phillips that the “reasonable certainty” required to prove lost value is not the same as that required to prove lost profits: “[W]hen evidence of potential profits is used to prove the market value of an income-producing asset, the law should not require greater certainty in projecting those profits than the market itself would.”
The trial court in Phillips entered judgment for the plaintiff on its tortious interference claim against defendant Phillips, subject to a remittitur of the jury’s $66.5 million damage finding to $31.16 million. The plaintiff conditionally agreed to the remittitur, and both the plaintiff and Phillips appealed. The court of appeals reversed the remittitur and other aspects of the trial court’s judgment, and rendered judgment for the plaintiff on the jury’s verdict.[2]/ Phillips and the other defendants successfully petitioned the supreme court for review. The supreme court has jurisdiction over questions of law, which it exercised to clarify that proof of lost value requires “reasonable certainty” but that the meaning of “reasonable certainty” for proof of lost value is not exactly the same as “reasonable certainty” for proof of lost profits. The supreme court does not have jurisdiction to decide whether a particular jury finding is supported by factually sufficient evidence, however, so it necessarily remanded that question to the court of appeals for its determination. The court of appeals will therefore reconsider the evidence in the record of the fair market value of the plaintiff’s lost interest in the Bulgarian concession in light of the “reasonably certain” criteria explained by the supreme court in Phillips and decide whether the record evidence is sufficient to support the jury’s award of $66.5 million damages and whether the trial court erred in suggesting a remittitur to $31.16 million. No matter how the court of appeals disposes of the case on remand, the case may well end up before the supreme court a second time.
[1]/ 58 Tex. Sup. Ct. J. 803, 2015 WL 2148951, 2015 Tex. LEXIS 439 (Tex. May 8, 2015).
[2]/ Carlton Energy Grp., LLC v. Phillips, 369 S.W.3d 433, 465 (Tex. App.—Houston [1st Dist.] 2012).